Affirmative Action in a Competitive Economy

By Andrea Moro, Peter Norman. Social Science Research Network, 2003

129 citations recorded by the source corpus.

We consider a model of endogenous human capital formation with competitively determined wages, where discrimination between ex ante identical groups is sustainable in equilibrium. An affirmative action policy consisting of a quota may "fail" in the sense that there still may be equilibria where groups are treated differently. However, the incentives to invest for agents in the discriminated group are improved by affirmative action if the initial equilibrium is the most discriminatory equilibrium in the model without the policy. The welfare effects are ambiguous. We demonstrate that it is possible that the policy makes the intended beneficiaries worse off: even if the starting point is the most discriminatory equilibrium the expected payoff may decrease for all agents in the target group.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/060260d7096755357e84c4351232757a79ff64ca

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In Economics and Econometrics

1. Dennis Epple
2. Lowell J. Taylor
3. Derek A. Neal

Citations in the corpus

• Does Affirmative Action Work? Caste, Gender, College Quality, and Academic Success in India (2016, background): “Epple, et al. (2008) likewise find that race-neutral policy would 2 The economics of affirmative action is developed in such work as Lundberg and Startz (1983), Coate and Loury (1993), Moro and Norman (2003), and Fryer and Loury (2005).”
• A Theory of Affirmative Action in College Admissions (2006, unknown): “Moro and Norman (2003) suggests that in any group of workers, the incentive of acquiring skills is weakened if the fraction of skilled worker in the other group is increasing.”